Financial Management in Public Sector Unit

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FINANCIAL MANAGEMENT INPUBLIC SECTOR UNIT

Presented by :-

Nitin Malusare (18 )Amol Patil ( 19 )


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PUBLIC SECTOR

The public sector is that portion of societycontrolled by national, state or provincial,and local governments. the public sector

encompasses universal, critical servicessuch as national defense, homelandsecurity, police protection, fire fighting,

urban planning, corrections, taxation, andvarious social programs.


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INTRODUCTION

Before independence, there was almost noPublic sector in Indian economy.

After independence India adopted the road of

planned economic development through Fiveyear plans.

The passage of Industrial Policy Resolution of

1956 and adoption of socialist pattern ofsociety as the national economic goal of thecountry built the foundation of the dominantpublic sector as we see it today.


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EVOLUTION OF PUBLIC SECTOR IN

INDIA

To help in the rapid economic growth andIndustrialization of the country and create

necessary infrastructure for economicdevelopment.

To earn return on investment and utilizeresources for development.

To promote redistribution of income and wealth.

To create employment opportunities. To promote balanced regional development.

To promote import substitutions, save and earnforeign exchanges for the economy.


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The objectives of public sector

enterprises1. Economic objectives

i. Economic development

ii. Planned growth

iii. Balanced regional development

iv. Generation of surplus

v. Provide employment

2. Social objectives

Control monopoly

distribution of wealth

Provision of essential goods and services

Takeover of sick units

3. Political objectives

i. Public interest

ii. National defence

iii. Socialism


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DISTINCTION BETWEEN PUBLIC SECTOR

AND PRIVATE SECTOR ACCOUNTING Different Accounting System - Private sector accounts are prepared

on accrual basis i.e. earning and spending etc. but public sectoraccounts are maintained on cash basis i.e. cash receipt and cashpayment

Profit or Loss - The purpose of public sector account is to depict

accountability to the legislature while private sector accounts try todepict commercial profit earned for the year ended.

Balance Sheet - In private sector accounts, balance sheet showsassets and liabilities on a cumulative basis but in case of publicsector accounting, the current years expenditures as well as capitalreceipts are shown

Equation - In private sector accounting equation of assets andliabilities takes the following form: Capital, Surplus, Other liabilities;Fixed assets, Current assets, Investments. But in case of publicsector accounting equation takes the following form: Public sectoraccount receivables-Payables


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Depreciation - In private sector accounts,

depreciation is charged on income statement toarrive at true profit or lossBut in case of publicsector accounting, there is no provision forproviding depreciation. It lost its relevance inproviding depreciation in absence of proper valueof asset; but in certain cases like TransportationCompany which charges depreciation formaintaining its assets.

System of Entry - Under private sector accounting,

double entry system is followed andjournal,ledger, trial balance can be prepared. But in thecase of public sector accounting, single entrysystem is followed


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What is Public Sector Management?

The public sector comprises upstream core ministries and centralagencies, downstream bodies including sector ministries, and non-executive state institutions. Upstream bodies include coreministries and agencies at the center of government, such as theMinistry of Finance and the offices that support the head of

government, which have functions that cut across sectors.Downstream bodies include both sector ministries and agencies,including education and health providers which deliver and fundservices under the policy direction of government.

They also include a diverse group of more autonomous bodies suchas regulators and State-Owned Enterprises and corporate bodies

which, in many countries, still provide the majority of infrastructureservices despite extensive privatization. Non-executive stateinstitutions include judiciaries,3 legislatures and institutions such asSupreme Audit Institutions.


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Public Sector Organizations and

Functions

The Public Sector and its functions

Center of

Government/

Upstream

Sector

Agencies/

SOEs andcorporate

bodies/

Downstream

Fiscal and Institutional Sustainability:

Realistic and achievable revenue

targets

Cooperation between levels of

government

Support for oversight bodies

Effective management of fiscal policyand aggregates

Sector Outputs:

Services

Regulations

Infrastructureinvestments

Sector policies

Objective

and Subjective

Development

Outcomes


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Downstream, the public sector delivers outputs that directlymatter to citizens and firms . Itprovides firms and householdswith services, such as health and education, housing, transport,

electricity or security, through direct provision and throughfunding.

The public sector is also responsible for some less tangiblebut equally critical outcomes. It must encourage bothfiscaland institutional sustainability. It must provide systems and

processes that enable governments to manage publicrevenues, expenditures and debt ensuring that they remainwithin agreed fiscalaggregates. It must manage the allocationof fiscal, administrative and functional authorities across levelsof government in a way that ensures cooperative andconstructive engagement between them.

The public sectormust also work with and supportaccountability and governance mechanisms (judiciaries,legislatures and othernon-executive state institutions such asSupreme Audit Institutions) to ensure that they providetransparency through credible arms-length oversight.


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How these public sector results are achieved

matters. The subjective individual, household

and firm perception of being well-governedis a desired outcome of well-functioning

public sector arrangements, not least because

a trusted government is one which generatesless resistance from tax payers. In other

words, the public sector is not only important

for what it does, it is also important for how it

is seen to do it.


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Why does it matter?

The size and economic significance of the publicsector make it a major contributor to growth andsocial welfare. It is important to understand, andimprove, what it is achieving with its very significant

expenditures . Its achievements emerge in thequality and nature of the services it provides, theinfrastructure it finances or underwrites and thequality of its social and economic regulation and itssector policy objectives. How well those publicsector activities are managed is a key developmentvariable.


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THANK YOU

Documents

Financial Management in Public Sector Unit